Arista Networks (ANET) Surges 17.5% After Strong Q2 Earnings

Arista Networks closed at $138.78, up 17.5%, after delivering strong Q2 results and upbeat guidance. The stock surged as revenue climbed 30% year-over-year and margins expanded, reinforcing its position in AI-driven networking.

Key Financials (Q2 2025 vs. Q2 2024):

Revenue: $2.205B (+30.4% YoY, +10% QoQ)
GAAP EPS: $0.70 vs. $0.52
Non-GAAP EPS: $0.73 vs. $0.53
GAAP Net Income: $888.8M (+33.6%)
Non-GAAP Net Income: $923.5M
GAAP Gross Margin: 65.2% (up from 64.9%)
Non-GAAP Operating Margin: 48.8% (up from 46.5%)

Guidance – Q3 2025:

Revenue: ~$2.25B
Non-GAAP Gross Margin: ~64%
Non-GAAP Operating Margin: ~47%

Arista continues to execute above expectations, with Q3 revenue guidance suggesting a sequential increase.

Operational Highlights:

Record Operating Income: Non-GAAP operating income crossed $1B for the first time.
Strong Product Growth: Product revenue grew 32% YoY to $1.88B, while services rose 22.7% to $327.8M.
AI Campus & Branch Expansion: Arista rolled out Wi-Fi 7 access points, switching and WAN solutions tailored to AI-driven campus needs.
Strategic Acquisition: Acquired Broadcom’s VeloCloud SD-WAN portfolio to enhance WAN capabilities across global enterprise locations.
Global Supply & R&D Push: Increased manufacturing and R&D footprint in India under “Make in India” initiative.
Leadership Addition: Hired Todd Nightingale (former Fastly CEO and Cisco exec) as President & COO to strengthen enterprise and cloud segments.

Cash & Balance Sheet Health:

Cash & Equivalents: $2.23B
Marketable Securities: $6.62B
Deferred Revenue: Jumped to $2.79B from $1.73B YoY (+61%), indicating strong forward bookings.
Share Buybacks: $983M in stock repurchased YTD, signaling confidence in long-term valuation.

Context vs. Peers:

Arista’s 30%+ YoY growth outpaces many peers in networking and infrastructure, including Cisco and Juniper.
Gross and operating margins remain industry-leading.
Positioned well in the AI data center buildout theme alongside Nvidia ecosystem players.

Observations:

The company’s broad exposure to AI-driven infrastructure, robust bookings, and SD-WAN integration gives it leverage against hyperscaler and enterprise tailwinds.
Deferred revenue growth is a critical bullish signal, supporting revenue visibility into H2 2025.

Arista’s strong execution, AI-driven innovation, and expanding enterprise footprint make it a standout in cloud networking.